Birds Eye and Uk Frozen Food
Which facets of the production and distribution chain did Birds Eye vertically integrate into early on? Which facets did it not? In particular, why did it integrate into cold storage but not farming (at least fully)?
Birds Eye owned every facet of the value chain from processing to distribution to individual retailers. It included owning processing factories, cold stores and refrigerated trucks. It did not, however, owned the production (i.e. farms) and the retail operation (i.e. retail stores).
Farming is not integrated to Birds Eye’s vertically integrated structure because Birds Eye did not need it. Farming land is not an asset-specific investment. There were plenty farming lands available at the time Birds Eye was established. In order to secure consistent supply of high quality raw materials, Birds Eye could easily go into contracts with farmers’ cooperative with the specifications it desired, which Birds Eye did. In contrast, Birds Eye owned cold stores as well as distribution network because there were no sufficient resources it could outsource these processes to at that time.
For instance, having cold stores that were located close to where the raw materials were produced was critical to Birds Eye business but such facilities were not available at the sites. Birds Eye could ask a refrigerator company/any other company for that matters to build a cold store in a location it desired but that would not be feasible because of the specifity of the asset, its sole purpose is to store Birds Eye’s frozen products that were processed on nearby site. Due to its specifity, any partnership would be prone to fail. The cold store owner would try to charge Birds Eye higher price because it knew Birds Eye needed the cold store. On the other hand, Birds Eye would like the cost reduced because it knew the cold store could be used by other frozen food companies due to its location.
Similarly, Birds Eye owned refrigerated trucks to deliver its products to its network of retailers because at that time no refrigerated trucks